The parent of cable networks HGTV, TLC, Food Network and the Discovery Channel launched streaming service Discovery+ on January 4 in the U.S. and is rolling it out globally. The $5-a-month service has a limited amount of advertising and 55,000 hours of programming. It accounts for the majority of the company’s total streaming number, though Discovery also operates niche services focused on golf, European sports, food and other areas.
Executives have not laid out a specific target number of subscribers but they describe the service as a valid complement to Netflix, which has 203 million paying customers around the world. Verizon has signed on as a key distribution partner, bundling one year free of Discovery+ with many customer plans.
The streaming numbers came as the company reported flat revenue for the fourth quarter of just shy of $2.9 billion and diluted earnings of 76 cents a share. The revenue and profit numbers exceeded Wall Street analysts’ forecasts, though earnings fell 22% from the year-earlier quarter.
As with Disney and other traditional media players, Discovery is seeing a reward from investors for its investment in streaming. Shares in Discovery have recently set an all-time high above $50. They spiked 8% in pre-market trading on the news about early results for Discovery+.
The consensus estimate by analysts for streaming was 10.5 million subscribers.
A 5% rise in domestic distribution revenue offset a dip in international distribution and ad revenue.
Advertising was flat, with the company saying that higher pricing and monetization of content on new platforms like streaming were offset by “secular declines in the pay-TV ecosystem and lower ratings.”
Free cash flow, a key metric, plunged to $441 million from $1.1 billion in the year-earlier quarter, which the company blamed on the impact of Covid-19, the timing of spending on content (including sports rights payments), taxes and working capital.
Discovery’s total share of viewing across the international portfolio improved 4% on average in the quarter. That marked six consecutive quarters of year-over-year share improvement, with strong performance in the UK, Spain and Poland. It said TLC had particularly strong appeal with women in 2020, including its best total viewer numbers and ratings among women 25 to 54 ratings in network history.
CEO David Zaslav said the company’s track record of supporting apps like Discovery Go, which deliver linear programming via streaming for pay-TV customers, has helped propel Discovery+. The service has 100 advertisers, he noted.
During a conference call with analysts, Zaslav continued to emphasize the ways Discovery’s streaming effort differs from those of companies seeking a share of the scripted programming marketplace. The company’s portfolio of networks account for “50% of what’s watched on TV,” he said. Discovery+ doesn’t just replicate linear programming but offers The strong start for Discovery+, he said, proves that “people are willing to pay for that other 50% so far. And that could be a yellow brick road for us.”
JB Perrette, president and CEO of Discovery International, said Discovery+ in the broader streaming arena “is not an ‘either-or’ but an ‘and.’ It’s looking like even more of an ‘and’ than it did in December.”
Jill Goldsmith contributed to this report.